Yahoo to invest another $100 million in Alibaba

Yahoo corporation of Sunnyvale has announced that it will invest an additional $100 million in the Chinese trade portal Alibaba. This is on top of the billion dollars in cash that Yahoo already paid Alibaba in 2005 for a a 40 percent stake in the Chinese firm’s parent, Alibaba Group. As part of that transaction, Yahoo also turned over all of their China assets and operations to Alibaba making Yahoo China a wholly owned subsidary of Alibaba.

The $100 million is for a ten percent share in Alibaba.com Corp, a subsidiary of Alibaba group that is planning an initial public offering on the Hong Kong exchange that it hopes will raise 1.5 billion dollars or more.

The Alibaba trade portal has a registered user base of 24.6 million business-to-business customers. The company’s Web site connects small and medium-size manufacturers with buyers. Companies can post products for sale or buy from Alibaba’s Web site for free, but it charges Chinese companies a whooping fee of 40,000 yuan, or $5,300, to to become “premium members” that gives them access to services like a customized home page and higher placements in search results. A similar service is offered to suppliers from other regions for an annual fee of $589.

A recent analysis in Forbes titled “Is Alibaba worth more than Google?” noted that pricing for the Alibaba IPO “works out to an astronomical price-to-earnings range between 94.5 and 106.3 times 2007 earnings. By contrast, Google shares were priced at a P/E of 90 in its IPO and currently fetch a 50.66 multiple.” They also noted that Alibaba had left out two of its choice nuggets in this IPO. The listed company will not include two fast-growing Alibaba Group businesses: its online shopping unit, Taobao.com, and its online payment services provider, Alipay.

Alibaba shares are scheduled to begin trading on the Hong Kong stock exchange Nov. 6.